A common question about insurers is simple: if premiums keep rising, are companies paying out less in claims? The answer is in a few standard ratios that regulators and analysts use to judge underwriting results. This article explains them and shows how US property/casualty (P&C) insurers have performed in recent years.
The key ratios in plain English
- Loss ratio. The NAIC defines it as the percentage of incurred losses to earned premiums. In industry reports it usually includes loss adjustment expenses, the cost of investigating and settling claims.
- Expense ratio. The share of premium spent on acquiring and servicing policies: commissions, salaries, technology, premium taxes.
- Combined ratio. Loss ratio plus expense ratio (plus policyholder dividends, where paid). Below 100% means an underwriting profit; above 100% means the insurer paid more in claims and expenses than it earned in premiums.
Insurers also earn investment income on the premiums they hold before claims are paid, so a company can be profitable overall with a combined ratio slightly above 100%. But a ratio persistently above 100% is a warning sign.
US P&C results, 2021–2025
| Year | Net premiums written | Loss ratio (incl. LAE) | Expense ratio | Combined ratio | Net underwriting gain/(loss) |
|---|---|---|---|---|---|
| 2021 | $719.9 billion | 72.5% | 26.3% | 99.6% | ($0.1 billion) |
| 2022 | $781.7 billion | 76.4% | 25.7% | 102.5% | ($24.7 billion) |
| 2023 | $863.4 billion | 76.3% | 24.9% | 101.7% | ($19.7 billion) |
| 2024 | $938.7 billion | 71.2% | 25.3% | 96.9% | $25.3 billion |
| 2025 | $976.8 billion | 66.5% | 25.8% | 92.9% | $68.7 billion |
Source: NAIC, P&C Industry Snapshot for the period ended December 31, 2025 (figures adjusted to exclude affiliated amounts; filings as of March 3, 2026).
What the numbers show
2022–2023: claims outran premiums. Combined ratios above 100% meant the industry lost money on underwriting two years in a row, with underwriting losses of about $24.7 billion and $19.7 billion. Claim costs rose faster than prices could be adjusted.
2024–2025: prices caught up. Net premiums written grew about 36% between 2021 and 2025, from $719.9 billion to $976.8 billion. As rate increases were earned, the loss ratio fell from 76.4% in 2022 to 66.5% in 2025, and the industry posted an underwriting gain of about $68.7 billion in 2025. Net investment income added another $88.9 billion in 2025, at an investment yield of 3.56%.
So the answer to "premiums grow, claims lag?" depends on the period. After a period of losses, premiums rise and claims temporarily lag behind; when results become very profitable, competition usually pushes prices down again. That pattern is the insurance cycle, discussed in underpricing and the insurance cycle.
Why premiums and claims move at different speeds
- Written vs. earned premium. A 12-month policy written in December is mostly earned the next year, so rate changes show up in results with a delay.
- Claims take time. Liability, workers' compensation and injury claims can take years to settle. Insurers set aside reserves for them, and later reserve changes affect current results.
- Regulatory approval. In many states, rate changes for personal lines must be filed with the insurance department, which can slow adjustments.
- Catastrophes. A severe hurricane or wildfire year can add several points to the combined ratio regardless of pricing.
Beyond primary insurers
Reinsurers have been even more profitable lately. Aon reports an average combined ratio of 85.4% for 19 global reinsurers in the first half of 2026, down from 94.8% a year earlier. Lloyd's reported a combined ratio of 90.8% for the same period. See our reinsurance market overview.
What it means for policyholders
- After loss-making years, expect rate increases and stricter underwriting; after very profitable years, shop around, because competition improves your options.
- Do not judge an insurer by one year's result. Look at ratings and trends (see how to check insurer reliability).
- Review your deductible and limits at each renewal to balance price and protection.
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